Fintech is the acronym for “financial technology,” which includes references to software, mobile applications, and other technologies that enhance and automate financial services so that all transactions are more accessible and affordable. Some examples are online banking, internet payments, automatic portfolio managers and trading platforms.
In other words, it is the technology that facilitates financial processes, allowing consumers not to have the necessity to have cash in their pockets or go to a physical place to make purchases or transfers. Instead, they can do so virtually and automatically.
Blockchain is an excellent example of understanding fintech use. This technology allows transactions to be decentralized without an entity or third party being involved. That’s where the concept of “decentralized finance” comes from, a specific fintech field that seeks to eliminate the control of institutions over money and financial services.
This technology allows people and businesses to make transactions through financial platforms with sophisticated security and connectivity protocols; its main objective is to eliminate intermediaries from financial transactions.
Some sectors entering the world of decentralized finance, better known as DeFi, are tokenization, savings systems, credits, stablecoins, asset management, and insurance, among others.
DAPPs and DAOs
Dapps are decentralized applications that operate within the blockchain, allowing all transactions to work and take place there. They won’t use your information since they do not have access to it; everything is done anonymously. That is the main difference between traditional applications and dapps.
Here are a few characteristics of dapps:
- Store and encrypt data on a decentralized blockchain
- Use of smart contracts for its operation
- Grant benefits to its users
Golem is an example of a Dapp. This is used to rent computing resources to process data with different functionalities. Likewise, Bitcoin is even considered a Dapp since it meets its characteristics.
DeFi and blockchain technology also give rise to DAOs (decentralized autonomous organizations). They help organize and make organizations work by controlling them with algorithms, blockchain technology, and smart contracts to bring autonomy and transparency to organizations.
Smart contracts are published on the blockchain so anyone can review their operation and rules, but no one can modify them. This seeks to optimize the decision-making process and manage all operations to be executed automatically, according to previously established parameters.
Some examples of DAOs:
- Uniswap: a decentralized exchange for digital assets
- Compound: a platform allowing users to obtain interest on their assets by blocking them in their liquidity pools.
FINTECH + TRANSFORMATION OF THE REAL ESTATE MARKET
The most important innovation decentralized finance has brought to real estate is the tokenization of real estate assets. This process allows investors to access this market through security tokens representing a fraction of the property. In addition, it creates investment opportunities for people from all over the world to invest in this market, starting at just $100.
There is another way to buy a property through blockchain without dividing it: NFTs. You can buy an NFT that represents the property title, and you will be the asset owner. Hence, you can live in it, rent it, or do whatever you’d like.
This technology allows the registration and transfer of the property (or fraction) to be done immediately since the buyer only needs to fill out the KYC/AML form to verify their identity and the origin of funds. Then, the buyer can make the transaction directly without intermediaries, just negotiating with the other party. This decreases closing times and costs and makes the entire process more efficient.
DeFi can also be used to access mortgages to buy properties. Eliminates holding periods to verify the process and other procedures to grant it. In addition, through tokenization, you can sell portions of your property to fully pay a credit before planned and save money from de interest payments.
Learn more about how decentralized finance is changing investments in the real estate market by reading this blog (add link)!